Selling a home typically involves negotiation between two strangers with different objectives to fulfill their homeowning needs. However, there are scenarios where homeowners decide to keep their assets within the family and sell their homes to loved ones.
While it’s a noble gesture, there are parameters you have to consider when selling your Alpharetta home to a family member. For one, the Internal Revenue Service (IRS) looks at a family home sale differently from a typical home sale. Unlike a regular home sale, which is considered an arm’s length transaction, a home sale involving family members is viewed as a controlled transaction. They will examine the sales price to determine the fair market value or if the seller is gifting the buyer a lower sale price. If you’re selling a home to your child, a sibling or an extended family member, here are some tips to ensure the sale goes through smoothly.
Define the Process and Hire Professionals
While selling to a family member might sound simple, you still need to agree on a definitive process and hire the right professionals to help you secure the deal. Discuss how the deal will be financed and set up a suitable timetable for when you expect the sale to be completed. Additionally, you need to agree on who the chief decision-maker is for the buyer and seller to avoid any confusion and prevent other parties from involving themselves with the intent of changing the initial agreement.
Additionally, you need real estate agents familiar with the terminology and documents like purchase contracts to ensure that every aspect of the transaction runs smoothly. While hiring one agent might seem like enough, remember that this is a business transaction first. Separate agents should represent both parties to ensure agreement over the fair market value while also ensuring state guidelines are being followed.
Get a Comparative Market Analysis
Your real estate agent should do an appraisal of the home to determine its worth correctly. The agent should conduct a comparative market analysis to ensure you’re extracting the best possible value of your home compared to others within your neighborhood.
A professional home inspection should also be conducted, usually requested by the buyer, to identify potential defects or issues throughout the home. Each of these elements factors into the home’s fair market value, making it a fair transaction for all parties involved.
Agreeing on Prices and Closing
Based on the appraisal or the estimate made by the real estate agent, you could come to a price agreement. However, you’ll want to ensure that contingencies are placed in the purchase contract. These contingencies include whether the buyer can’t attain a new mortgage by a specific date.
Should the purchase involve a lender, the closing process will be more traditional, involving a title company and featuring a real estate lawyer. Alternatively, you could agree to a seller-financed arrangement where you draft a promissory note including loan terms. You then record that note with the local government.
When you’re working with a family member on a real estate transaction, Alpharetta Zen will help you put everything in place. Contact one of our agents today for help!